Broadwick Financial Services Ltd v Spencer
| Jurisdiction | England & Wales |
| Judge | Lord Justice Dyson,Lord Justice Robert Walker,Lord Justice Auld |
| Judgment Date | 30 January 2002 |
| Neutral Citation | [2002] EWCA Civ 35 |
| Docket Number | Case No: B2/2001/1022 CCRTF |
| Court | Court of Appeal (Civil Division) |
| Date | 30 January 2002 |
[2002] EWCA Civ 35
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM TRURO COUNTY COURT
(His Honour Judge Neligan)
Royal Courts of Justice
Strand,
London, WC2A 2LL
Lord Justice Auld
Lord Justice Robert Walker and
Lord Justice Dyson
Case No: B2/2001/1022 CCRTF
Mr P. Wulwik (instructed by Messrs Blatchfords) for the Respondent
Mr N. Levy (instructed by Messrs Ralph and Co) for the Appellants
Introduction
Mr and Mrs Spencer appeal against the decision of His Honour Judge John Neligan dated 23 March 2001 at Truro County Court, whereby he granted Broadwick Financial Services Limited ("Broadwick") an order for possession of 3 Churchtown, St Issey, Wadebridge, Cornwall ("the property") and dismissed Mr and Mrs Spencer's counterclaims. Broadwick claimed possession of the property pursuant to a legal charge dated 21 October 1991, which secured a credit agreement of the same date by which it made a loan to Mr and Mrs Spencer in the sum of £7,700. The credit agreement is regulated by the Consumer Credit Act 1974 ("the Act"). Mr and Mrs Spencer challenged the enforceability of the credit agreement on the grounds that it had not been properly executed in compliance with the provisions of Part V of the Act as to the making of the agreement. They also sought to reopen the agreement and the legal charge as an extortionate credit bargain under sections 137 to 140 of the Act.
The Facts
On the 13 February 1989, Mr and Mrs Spencer purchased the property for £19,095. The purchase was funded by means of a mortgage from the Regency and West of England Building Society, which later became the Portman Building Society ("PBS"). Thereafter, Mr Spencer was unemployed from time to time. By July 1991, there were substantial arrears under the PBS mortgage. During the summer of 1991, Mrs Spencer saw an advertisement for loans in a newspaper. She telephoned the contact number, and was sent an application form by a company called Carrox Limited ("Carrox") of Trafford Park, Manchester. She and her husband applied for a loan of £4000, completed the application form and returned it to Carrox. The form was duly sent by Carrox to Barex Brokers Limited ("Barex"). In due course a credit agreement was entered into between Barex and Mr and Mrs Spencer. The amount of the loan was £4840 repayable by 180 monthly instalments of £99.49. The annual percentage rate (APR) was 29.78 per cent. The sum of £4840 included £400 payable as a brokerage fee to Carrox and £440 payable as the premium for a payment protection plan. On 14 August 1991, Barex registered a second charge dated 2 August 1991 on the property. The arrears due under the PBS mortgage (now £2101.30) were paid off and the balance of £1898.70 was received by Mr and Mrs Spencer.
Within a few weeks, Mr and Mrs Spencer wished to borrow a further sum of £1000. Mrs Spencer approached Carrox to ask them to arrange a further loan. This was the first in a series of steps which culminated in a credit agreement for £7700 between Mr and Mrs Spencer and Argyll Financial Services Limited ("Argyll") secured by a legal charge on the property (both dated 21 October 1991). On the day of completion, Argyll transferred the benefit of the legal charge and the agreement to Broadwick. The loan was disbursed in the following way:
| To PBS to discharge further arrears under the first mortgage | £362.00 |
| To Barex to redeem the second mortgage | £6026.56 |
| Brokerage fee payable to Carrox | £700.00 |
| To Mr and Mrs Spencer the balance of | £611.44 |
| £7,700. |
It is necessary to trace the steps that led to this credit agreement and legal charge. Following Mrs Spencer's approach, Carrox sent a fax on 24 September 1991 to Messrs Brand Montague, a firm of solicitors who acted for a number of "non-status lenders". Mr Brand had been a director of several lending companies including Broadwick. The fax was marked "for the attention of EVS". "EVS" was Eileen Scott, who was employed by a company called Suburban and Provincial Management Limited, which managed portfolios of various lending companies in the non-status market, including Argyll and Broadwick. The fax referred to the "net amount of loan" as £7000 and the "brokerage fee" as £700. The second page of the fax contained details which the judge found had been provided to Carrox by Mrs Spencer. These included personal information about Mr and Mrs Spencer, such as their ages, their occupations, earnings, the value of the property and the amount of their current mortgages. The document indicated that the amount that they wished to borrow was £1000.
Mr Brand, who gave evidence, agreed that this was a request by Carrox to Brand Montague to issue a loan agreement. On the same day, Brand Montague wrote to Mr and Mrs Spencer a letter which was headed:
"Your Brokers: CARROX LTD
Loan Application for £7700.00
Our Clients: ARGYLL FINANCIAL SERVICES LTD."
The letter stated that Brand Montague acted for Argyll which had approved the loan application. Enclosed with the letter were a copy of the credit agreement for each borrower, a copy of the legal charge, and a "concession letter". The letter concluded:
"We will be sending in 8 days from today the signable copies. If you have any queries you should consult CARROX LTD your introducing Broker."
The copy of the proposed credit agreement included the following condition:
"THE BORROWER(S) CONFIRM HAVING READ AND UNDERSTOOD THIS AGREEMENT. IN PARTICULAR THE BORROWER(S) CONFIRM HAVING BEEN RECOMMENDED BY THE LENDER TO TAKE INDEPENDENT LEGAL OR OTHER APPROPRIATE PROFESSIONAL ADVICE ON THE CONTENTS HEREOF AND IN RESPECT OF THE TRANSACTION GENERALLY."
Immediately below this condition appeared the following words:
"YOUR RIGHT TO WITHDRAW
This is a copy of your proposed credit agreement which is to be secured on land. It has been given to you now so that you may have at least a week to consider its terms before the actual agreement is sent to you for signature you should read it carefully. If you do not understand it you may need to seek professional advice. If you do not wish to go ahead with it, you need not do so …."
There were then set out the "Terms of Agreement", which were the same as those that were incorporated in the credit agreement that was eventually concluded on 21 October.
On 2 October, Brand Montague wrote to Mr and Mrs Spencer. They enclosed various documents that were required to be completed in order that the transaction could be concluded. The letter stated:
"If you have any problems in completing the forms your broker CARROX Ltd can help you and even witness the document if you so wish".
The enclosed documents were: the credit agreement to be signed, extra copies of the unsigned credit agreement for them to keep, the "certification and confirmation letter" and the legal charge. A representative of Carrox then telephoned Mrs Spencer, and told her that she and her husband should not sign any document until one of their representatives had called to see them. A Mr Harper visited them at their home on Sunday 6 October. Mr Harper was a Carrox representative. The meeting lasted between twenty and thirty minutes. During the course of it, Mr and Mrs Spencer signed a number of documents which Mr Harper produced to them. These documents included an application form dated 7 October 1991. This document was headed "Carrox Ltd" and was in a standard form. It recited that the amount required was £7700 repayable over twenty years, and gave personal details of the applicants including their incomes and occupations, outgoings and the details of the property to be offered as security. The other documents signed by Mr and Mrs Spencer were (i) a letter authorising payment to Carrox of a fee of £700; (ii) an undated "confirmation and certification letter" addressed to Argyll, giving various confirmations and instructions regarding the loan, including an instruction for a fee of £700 to be paid to Carrox; (iii) a "signable" credit agreement for a loan of £7700; and (iv) a legal charge securing the credit agreement.
So far as material, the confirmation and certification letter provided as follows:
"I confirm and certify as follows:
….
2. That once my first mortgage arrears (if any) have been paid, I will be able to afford the 240 monthly repayments of £147.58 in addition to my first mortgage repayments of £19.500.00 per month
…
4. I understand that the only financial facilities offered by the Lender are the ones stated in the copy Credit Agreement which has been submitted to me and that the Lender has not offered any other financial facilities, whether by way of further advance, third party re-mortgage, overdraft or of any other kind, nor has any representation of any other facilities been made by anyone acting on the Lender's behalf."
APR 29.6%
The credit agreement included the following terms:
"D. Finance and related particulars.
i) Amount of credit advanced: £7,000.00
ii) Current interest rate 1.97% per month equivalent to 26.4% per year (variable as specified below)
iii) Total amount of loan including broker's fee is £7,700.00 repayable by 240 monthly instalments of £147.58.
Other charges: Legal costs and disbursements £291.00
The APR is based on a total charge for credit which includes your broker's fee of £700.00. Such fee is not a term or condition of the loan imposed by the lender.
E. The legal charges shall become due upon completion of the loan. The lender may at its discretion defer collection of the said charges...
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